The implementation of projects such as the Fortum biomass cogeneration plant in Jelgava in Latvia is threatened by frequent changes in national legislation, foreign investors point out.
Photo: Evija Trifanova / LETA
Raivis Švears, Olafs Zvejnieks, “Latvijas Avīze”, JSC “Latvijas Mediji”
Renewable energy producers threaten to sue the Latvian state for 350 million euros due to frequent changes in legislation.
“Our investors are not populist thieves and bandits, but SEB, Swedbank and Citadele bank pension funds, as well as the European Bank for Reconstruction and Development and the European Investment Bank. Thus, a large part of the Latvian population.
Doubts as to the thieves and bandits include the Estonian state-owned Enefit, the Finnish state-owned Fortum and Convergen, the real beneficiary of which is the British Nicholas Logotetis, who founded the non-governmental organization Concordia, whose board includes former President Vaira Vike-Freiberga.
Not only will we protect all the legitimate rights of our investors, but we are seriously considering suing individual politicians for defamation. We do not have to be responsible for the fact that public authorities do not deal with individual scammers. The fact that 1% of society is thieves does not mean that society as a whole is thieves. “
Matīss Paegle, Investment Director of the venture capital fund BaltCap Infrastruktūras fonds, told Latvijas Avīze that several foreign investors working in the field of energy from Finland, Estonia, Denmark, Luxembourg and Cyprus plan to sue the Latvian state for more than 350 million euros. , if the planned amendments to the Electricity Market Law of the Ministry of Economics (MoE) are implemented, as a result of which the granted support for electricity production from renewable energy sources (RES) would be abolished and a number of other changes would come into force for RES producers.
Together with the claims of other investors, the total amount requested could exceed 900 million euros. Investors have also addressed senior government officials with an open letter.
In addition, Paegle emphasized that in case of litigation, investors will appeal to the international court not only against the so-called “OIK cancellation law”, which was implemented by former Economy Minister Ralph Nemiro shortly before his resignation, but against all changes made by Cabinet Regulation no. 221 and no. 262.
Paegle emphasizes that these rules have changed 12 times in the last ten years.
The promised wallet does not fall
The letter to officials said that in recent years businesses have decided to invest in energy projects only because there was a support mechanism – the state promise to provide support for projects that are not profitable under market conditions, but the state vitally needed to achieve state energy and environmental goals. .
“Implementation of projects in the field of energy in Latvia has not been possible at all so far and is still not possible, relying only on the electricity market price. This is proved by the fact that during the last ten years no new power plant has started operating in Latvia, which would have been established without the planned support. ”
However, the situation is not unique only in Latvia – the situation is identical in Estonia and Lithuania, as well as in other EU countries, because the technological development of RES power plants has not allowed their use without support so far. In particular, TEC-1 and TEC-2 stations would not be profitable without OI.
“I hope that politicians who will vote for such anarchy are ready to be personally liable for hundreds of millions of losses to the state budget. We are not just about war after war, but we are ready to protect our investors’ money.
It must be understood that I have to answer to Latvian pensioners for lost pension savings. Of course, we will not sue if the government offers reasonable alternatives or variants that not only ensure the return on investment we have taken into account when making investments, but also maintain Latvia’s progress towards the obligations to achieve certain RES goals, ”says Paegle.
Without support – bankruptcy
The representative of BaltCap emphasized that the efficiency and cost of technologies are changing very rapidly, therefore it is not allowed to compare technologies more than ten years old with modern possibilities. This is exactly what has happened with wind, solar and other technologies – they have become incomparably cheaper and more efficient.
Paegle pointed out that it was impossible to build a green energy plant ten years ago without support.
At that time, Latvian biogas plants received 198 euros per megawatt hour (MWh) in mandatory procurement, but, for example, in Italy the amount of support was even higher – 280 euros per MWh, and we cannot speak of disproportionately large state support, as it was recognized as reasonable by both the Latvian Constitution court and the European Commission.
“If this support is deducted from the technologies of that time, all companies will go bankrupt,” the investor representative said. But with the new support mechanisms, the support is no longer necessary – allowing the construction of 240-meter-high wind farms with the latest turbines or large solar parks for the company’s own electricity consumption.
According to him, Latvia may seem like a large producer of green energy at the moment, but as other EU countries will invest a trillion euros in green energy production by 2030, Latvia will be in one of the worst situations in ten years.
As it is known, by 2030, Latvia must be able to produce 50% of all electricity consumed from green energy instead of the current 40%.
Latvia – champion of legislative changes
Juris Antužs, the head of the Estonian energy company Enefit Green in Latvia, was not so sharp in his answer, but he also acknowledged that the company is actively following changes in legislation and assessing their potential impact on the company’s business in Latvia.
If necessary, more than one draft amendment can be sued, but currently the company’s primary interest is to maintain the ability of the cogeneration plant in Valka to operate profitably.
“Frequent changes in regulatory enactments have characterized the Latvian legal system for years. Over the last 5-7 years, Latvia has shown “outstanding performance” in making changes that have had retroactive effect. “
Antužs said that the company’s investment priorities are wind and solar energy. In Latvia, he would like to expect a stable legal environment in which the state acts in accordance with international charters and investor protection laws.
“Currently, we ask the state to keep the promises made to investors several years ago, ensuring internationally accepted investor environmental standards.”
Also, the investors’ letter to public officials expressed dissatisfaction with the government’s decision two years ago to pay in advance to another OI beneficiary Latvenergo for its gas-fired thermal power plants TEC-1 and TEC-2 all OI payments amounting to 454.4 million euros.
“Such behavior on the part of the state is considered by foreign investors to be completely unfair, unequal and discriminatory against other market participants, threatening other companies to stop support immediately and without any compensation and reasonable transition mechanisms, as opposed to the state-owned dominant company,” the letter said.
We are fulfilling the task set by the Saeima
The Ministry of Economy, which oversees the renewable energy sector, made a dry comment on the matter.
Namely, that the legislator in Latvia is the Saeima, the government – only the executive power and therefore the Ministry cannot comment on the work of the Saeima without the Ministry analyzing the laws adopted by the Saeima. The Ministry is responsible for drafting the regulations of the Cabinet of Ministers, and it is possible to comment only on them.
“As it is known, for several years now, both the government and the Saeima have been actively discussing how to improve the supervision of power plants receiving state support and prevent the possibility of fraudulent transactions.
It is also pointed out that the high costs of electricity have a negative impact on the competitiveness of entrepreneurs. The task of the Ministry is to prepare draft government decisions in accordance with the decision of the Saeima in order to fulfill the task of the Saeima and achieve these goals.
The regulations of the Cabinet of Ministers approved by the Cabinet of Ministers this week (regulations of the Cabinet of Ministers on increasing electricity generation capacity using renewable energy resources and on electricity generation in cogeneration) were developed by the Ministry of Economics, fulfilling the delegation given in the Electricity Market Law. to implement the principles and conditions specified by law in the regulatory framework, ”the Ministry said in a comment.
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